Daily Newsletter, Wednesday, 7/8/2015

Table of Contents

Market Wrap

A Glitch and the FOMC

by Thomas Hughes

Global markets are under pressure as China, Greece and FOMC outlook dominate headlines.

Introduction

Global markets were under pressure this morning as Greece negotiations wear on and the Chinese sell-off extends itself. Starting in Asia, markets closed with a loss near -6%. The sell-off was not restricted to China, the Japanese Nikkei fell a little more than -3% in response to growing fears and a warning from China's regulator that "panic sentiment" was entering the market. A move by many Chinese companies to have their shares halted has only added to downside momentum as investors seek to sell whatever they can.

European markets were down in early trading, following Asia's lead, but were able to rebound by mid-day. A new proposal from Greek PM Tsipras renewed hopes a deal would be made and lifted indices around the region by nearly a full percent. Tsipras has delivered a set of proposals, with concrete plans expected to be unveiled as early as Friday with a Sunday meeting of creditors scheduled for Sunday. Today's meeting was canceled in response to the latest developments. Until then the ECB has pledged to keep emergency liquidity for Greek banks flowing.

The feeling was not matched here at home, futures were indicating a lower open right from the start and only moved lower throughout the morning. Other news included a ground-halt of United Airlines flights due to computer glitches, a couple of high-profile downgrades, a new round of lay-offs announced by Microsoft and a halt to trading on th NYSE . . . and all before the 2PM release of FOMC minutes.

Market Statistics

The minutes were not too revealing. One member was in favor of hiking rates last month, the rest of the panel is in agreement that the time is close but not quite yet. More data is needed, specifically sign of inflation reaching target levels. Looking back at the first quarter they say seasonal factors were involved that are likely not to carry over into the spring and summer. Global concerns were mentioned, including Greece and China. At the time of the meeting there was little expectation a deal for Greece would materialize.

A mid-day computer glitch had quotations on the NYSE reading zero. Trading on NYSE stocks were halted to address the issue which only affected that exchange and orders directed to it. NYSE stocks were still being traded through NASDAQ, ARCA and other routes. The problem was linked to a coding issue that was fixed in late afternoon. All orders routed directly to the NYSE prior to the halt were canceled.

Stocks fell as soon as the opening bell sounded. The indices hit lows over -1% by late morning. These losses were amplified following the NYSE foul-up, the low was hit just before noon. A small bounce shaved a half percent off of today's loss but once the FOMC minutes were released indices retreated back to their lows. By 2:45 the indices had hit the low of the day and trying to bounce. The NYSE glitch was resolved at 3:10, hours after it began, and drove the market back down to the lows of the day where it remained into the close of trading.

Economic Calendar

The Economy

The economic calendar was light on releases today, but heavy on impact. Only 2 releases today but one was minutes from the June FOMC meeting. The Mortgage Index, released at 7AM, shows a +4.6% jump in mortgage applications last week, this is up from a -4.7% drop the previous week. The data was adjusted for the shortened holiday week. On a not-adjusted basis applications fell -6%.

The rest of the week is pretty light on data as well. Tomorrow we'll get jobless claims, Friday we'll get Wholesale Inventories. Next week gets active again with a number of important releases including the Fed's Beige Book, Building Permits/Housing Starts, PPI/CPI, Philly Fed and Michigan Sentiment.

The Oil Index

Oil prices continue to fall as global concerns and rising supply weigh on outlook. The EIA announced a surprise build in WTI inventory that sent prices down by more than -1.75% on an intraday basis. WTI is now trading below $52 and at a three month low. Two other developments, one being an apparent impasse in the Iran nuclear talks and the other being an upgrade of 2015/2016 production levels, added to today's volatility and supply/demand expectations. It looks like supply is overcoming demand and could push WTI to the long term low just below $50.

The Oil Index fell more than -2.5% on the fall in oil prices. The index is still trading below the long term trend line and is testing 6 month lows set yesterday. The indicators continue to point lower in the near term but remain consistent with support over the short to long term. The 1,250 level could prove to be support but it looks like it will be tested in the coming days. 2nd quarter earnings could help push the index lower but so long as forward outlook remains positive it will most likely be an entry for long term bulls.

The Gold Index

Gold prices bounced from the $1150 level in today's session. This is long term support and just above the 12 month low. Prices have been pushed lower by strengthening dollar, driven by the Greek issue more than anything else, and are now at the bottom of the 5 month trading range. The indicators show gold is extremely oversold but could continue lower if support levels are broken. The FOMC minutes did little to strengthen to dollar and with the FOMC on inflation watch I remain bullish on gold. News could move gold over the next few day, I think the CPI/PPI data next week could give better clues to long term direction.

The gold miners traded flat most of today but succumbed to selling pressure before the close of trading. The gold miners ETF GDX is now trading just above long term support set over the past year. The indicators are bearish but very weak and consistent with support, MACD is divergent from prices and stochastic is deep in oversold territory while the index is trading within a range. This could lead to further downside but I think it would take another drop in gold prices to do so. The charts still look like a bottom is forming but caution is due given current market conditions. Inflation data could be the deciding factor and could result in a gold rally on low inflation/weakening dollar/no rate hike or rising inflation/rate hike.

In The News, Story Stocks and Earnings

Tesla got another major downgrade this morning. Pacific Crest moved the car maker to sector weight from over weight on valuation concerns. This makes the 2nd downgrade in 2 days, including a similar from Deutsch Bank yesterday. Pacific Crest puts price target at $293, a near 10% discount from Tuesday's closing price. The stock responded by slumping more than -4.6%. Earnings are scheduled for the end of the month, 7/30.

Harley Davidson also received a downgrade today. The company was downgraded from Outperform to sector perform by RBC Capital Markets based on flat demand. Price target was lowered to $59 from $65 with consensus in the range of $65. The stock fell a little more than -2.5% to break potential support near $55. Earnings are scheduled for 7/21, about two weeks from today.

Microsoft announced another round of lay-off's in its efforts to restructure the Nokia portion of the business. The tech giant is planning on cutting 7,800 jobs and will incur a $7.6 billion impairment charge. The cuts will come mostly from the hardware/smartphone segment and are in addition to the 18,000 cuts announced last year. Shares of the stock moved higheri nitially on the news and were the only Dow Component to do so but were not able to hold the gains into the close. Microsoft is scheduled to report earnings in two week, 7/21.

Alcoa reported earnings after the bell. The aluminum producer was expected to report a 18% decline in quarterly earnings from the previous quarter, the actual was much worse. EPS of $0.19 is $0.03 below consensus estimates but come on a small beat in revenues. The company is projecting steady growth for the rest of the year but cited weakness in South American and China. Company CEO was very positive on the results and forward outlook for the companies turnaround. Shares of the stock had been trading lower throughout the day, shedding more than -5%, and did not recover the loss after the report.

The Indices

The market fell today. Greece again was the excuse but other factors are at play. The move was led by the Dow Jones Transportation Index which a set new low. The transports fell over -2% to set a new near-9 month low in a move that looks more and more like it will go even lower. The index is now extending the fall below support that began two weeks ago and could go another 250 points lower. The indicators are bearish, pointing lower and indicating weakness. Stochastic confirms this today with a a bearish crossover of the lower signal line.

The NASDAQ Composite made the second largest decline today, falling more than -1.65%. The tech heavy index closed at the long term trend line and is setting up for a possible break of trend. The indicators are pointing lower in confirmation of a test of support along the trend line at least with a target near 4,750 should it break. The indicators remain consistent with an up-trend in the longer term so until further developments this appears to be a pull-back to trend.

The S&P 500 made the third largest decline, a little over -1.5%. The broad market is testing support levels near 2,050 and is indicated lower in the near term. The indicators are both bearish and moving lower with a break of support very possible. Next target for support is the long term trend line near the 2,000 level, about -2.5% below today's closing price. A retreat to the trend line would constitute a correction greater than -5%. Long term charts are still indicative of up trend so this dip still looks like a normal market correction and not a reversal.

The Dow Jones Industrial Average made the smallest decline today, only -1.47%. The blue chips set a new low in a move down from previously broken support and are heading for the long term trend line near 17,250. The indicators are pointing lower, as with the rest of the major indices, and suggest that this could happen in the next few days. If the trend line is broken next target is just below near 17,000.

The correction continues as we enter earnings season, as of now there is a dark cloud hanging over us in the form of negative earnings growth and global woe. Greece, China and Iran are all problems and need to be watched but even counting FOMC concern are not affecting our economy other than in the form of strengthening dollar. They will impact trading on a day to day basis but the long term trends remain up, except for the transports.

Some businesses are going to be hurt by forex but not all of them. Some other companies are going to post poor earnings, ie the energy sector. However, based on earnings trends, I expect this season is likely to be much better than expected and lead to higher market prices later this year. The correction may continue but the economy also continues to improve so until that changes I'll be looking to buy on the dip.

Until then, remember the trend!

Thomas Hughes

New Option Plays

The Up Trend Is Broken

by James Brown

Stop Loss: 85.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.1 million
Entry on July -- at $---.--
Listed on July 08, 2015
Time Frame: Exit PRIOR to earnings on July 30th
New Positions: Yes, see below

Trade Description:
The rally in CAH looks tired and seems to have peaked. The stock delivered a nice run from its 2012 lows near $37.00 per share all the way up to (almost) $92.00 in April 2015. That's a +148% move. Unfortunately the rally looks broken.

It would be easy to confuse CAH for a healthcare stock but technically it's in the services sector. According to the company,
"Headquartered in Dublin, Ohio, Cardinal Health, Inc. (CAH) is a $91 billion health care services company that improves the cost-effectiveness of health care. Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality.

Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #26 on the Fortune 500, Cardinal Health employs 34,000 people worldwide."

They seem to be doing everything right. Business has improved. They raised their dividend a few weeks ago. They're making acquisitions. Their last couple of earnings reports have been positive. CAH reported its Q2 report on January 29th. Results beat estimates on both the top and bottom line with sales up +14.8%. Their Q3 report was announced on April 30th this year. Earnings were up +16% to $1.19 per share. That beat estimates. Revenues were up +18.4% to $25.38 billion, also above expectations. Yet traders sold this report with shares of CAH plunging from $89 to $84 in one session. The only complaint seems to be slow sales in CAH's medical segment, which only rose +4% versus a +20% jump in sales for the drug segment.

Six weeks later CAH had crawled its way back to just above the $90.00 level when the stock rolled over again. News that CAH had purchased privately held Harvard Drug Group for $1.12 billion on June 5th didn't seem to do much for the stock.

Wall Street analysts still seem bullish. In June CAH received two new price target upgrades with new targets at $97 and $100. The point & figure chart is not so optimistic. The P&F chart is bearish and currently forecasting at $78.00 target but this could get worse.

Technically CAH had fallen to support near $84 and its simple 200-dma. Shares had been consolidating around this support for the last few days. Today's drop (-1.88%) is a breakdown below $84 and its 200-dma and marks a new four and a half month low. Tonight we're suggesting a trigger at $83.15 to buy puts. Plan on exiting prior to CAH's earnings on July 30th.

Trigger @ $83.15

- Suggested Positions -

Buy the AUG $80 PUT (CAH150821P80) current ask $1.25
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

China And Greece Bludgeon Stocks Again

by James Brown

The ongoing crisis in Greece and the plunging Chinese stock market are dragging the U.S. markets down with them. The major U.S. indices fell about -1.5% with the S&P 500 closing below its simple 200-dma for the first time since October 2014.

Current Portfolio:

CALL Play Updates

Cracker Barrel Old Country Store - CBRL - close: 154.90 change: -0.60

Stop Loss: 147.75
Target(s): To Be Determined
Current Option Gain/Loss: +37.5%
Average Daily Volume = 332 thousand
Entry on July 01 at $150.25
Listed on June 20, 2015
Time Frame: Plan on exiting prior to August 5th
New Positions: see below

Comments: 07/08/15:
CBRL held up pretty well today. The rest of the market suffered widespread losses. CBRL did post a loss but shares only fell -0.38% versus the S&P 500's -1.6% decline.

Broken resistance near $152 and $150 should offer support for CBRL.

No new positions at this time.

Trade Description: June 20, 2015:
It's summertime and that means vacations and road trips for a lot of Americans. That's good news for a company like CBRL because most of their 634 restaurants are located along major highways.

CBRL is in the services sector. According to the company,
"Cracker Barrel Old Country Store, Inc. provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping thatâ€™s surprisingly unique, genuinely fun and reminiscent of America's country heritageâ€¦all at a fair price. Cracker Barrel Old Country Store, Inc. (CBRL) was established in 1969 in Lebanon, Tenn. and operates 634 company-owned locations in 42 states."

Wall Street loves earnings growth and CBRL continues to deliver. Back in February the company beat earnings and revenue estimates and raised their 2015 guidance.
Their most recent report was June 2nd. CBRL reported their fiscal third quarter. Analysts were expecting a profit of $1.37 per share on revenues of $680 million. CBRL beat estimates with a profit of $1.49 per share. This is a +21% rise from a year ago and marks the fifth quarter in a row of double-digit earnings growth. Revenues also beat estimates with a +6.3% rise to $683.7 million.
CBRL said their comparable store sales were up +5.2%. Their comparable retail store sales were up +4.5%.

Management raised their normal quarterly dividend +10% to $1.10. They also announced a special one-time dividend of $3.00 per share. Both are
payable on August 5th, 2015 to shareholders on record as of July 17th.
CBRL offered a bullish outlook for both their fourth quarter and 2015. Management raised their 2015 earnings guidance from $6.40-6.50 to $6.60-6.70 per share. Wall Street was only expecting $6.55.

Technically the stock looks bullish. Shares have been consolidating their post-earnings gains the last couple of weeks but traders are buying the dip. Today CBRL is poised for a breakout past short-term resistance near $148.50. If the stock does breakout it could see some short covering. The latest data listed short interest at 17% of its small 18.9 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term target at $231.00.

Tonight we are suggesting a trigger to buy calls at $150.25. More aggressive traders may want to jump in early on a rally past $148.75.

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +43.5%
Average Daily Volume = 5.7 million
Entry on June 18 at $112.25
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

Comments: 07/08/15:
The market's sharp decline today weighed on DIS shares. The stock erased yesterday's rally with a -1.6% decline today. DIS settled near short-term support at its rising 10-dma.

No new positions at this time.
Readers may want to start adjusting their stop loss higher.

Trade Description: June 17, 2015:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working.
Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending.
Analysts are forecasting DIS earnings to grow +17% this year.

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares have since spent the last six weeks digesting gains in a sideways consolidation that has ignored much of the broader market's volatility. More recently DIS has started to rebound and is now at the top of its trading range. A breakout here could signal the next leg higher.

The point & figure chart is bullish and forecasting at long-term target of $154.00. I personally suspect that DIS could rally toward $120-125 before its next earnings report in August. Credit Suisse recently upped their price target to $130.
Tonight we are suggesting a trigger at $112.25 to buy calls.

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: -29.9%
Average Daily Volume = 417 thousand
Entry on June 22 at $72.35
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
New Positions: see below

Comments: 07/08/15:
Today's pullback in DWRE (-2.2%) erased yesterday's rally. Shares have closed back below the $70.00 level again. The stock is in jeopardy of hitting our stop loss at $68.65 if there is any follow through lower tomorrow.

No new positions at this time.

Trade Description: June 20, 2015:
2015 is shaping up to be a lot better than 2014 for DWRE investors. The stock delivered a rocky performance last year and spent much of it churning
sideways in a huge consolidation pattern (see the weekly chart below). The stock's momentum has turned bullish this year thanks in part to consistently strong revenue growth. The NASDAQ is up +8.0% year to date. DWRE is currently up +23.9%.

DWRE is in the technology sector. According to the company,
"Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world's leading retailers to continuously innovate in our complex, consumer-driven world. Demandware's open cloud platform provides unique benefits including seamless innovation, the LINK ecosystem of integrated best-of-breed partners, and community insight to optimize customer experiences. These advantages enable Demandware customers to lead their markets and grow faster."

With the exception of its Q4 report on February 19th DWRE has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenue growth has been +55.6%, +55.9%, +43.4%, and +54.3% for the last four quarters. The only miss was DWRE's bottom line number for the fourth quarter where it missed by a penny.

DWRE's most recent results were May 7th. The company said their Q2 profit was $0.16 per share. That is a big improvement from a ($0.05) loss a year ago and it was 27 cents better than the ($0.11) loss analysts were expecting. Revenues were $50.27 million compared to estimates for $49.5 million.
DWRE said their live customers were up +30% from a year ago to 279. The number of live sites surged 42% to 1,241.

Tim Adams, DWRE's CFO, commented on their quarterly results,
"During the first quarter, we continued to invest in growth and innovation.
We expanded our operations deeper into Europe and Asia. Our R&D team also made considerable progress on their key initiatives â€“ extending our platform deeper into the store, delivering our intelligence solutions and enriching our core commerce capabilities. As we move through 2015, we remain focused on scaling our organization to support the fast pace of our growth."

Back in April Goldman Sachs added DWRE to their conviction buy list. Yet shares didn't start moving until June. A couple of weeks ago shares broke out from a three-month consolidation pattern. The current rally could be getting a boost from short covering. The most recent data listed short interest at 12% of the relatively small 33.48 million share float. Currently the point & figure chart is bullish and forecasting an $85 target.
Tonight we're suggesting a trigger to buy calls at $72.35.

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: -31.0%
Average Daily Volume = 24.5 million
Entry on July 06 at $88.15
Listed on July 04, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments: 07/08/15:
FB had a rough day with a -1.8% decline. That's slightly more than the NASDAQ Composite's -1.75% drop. FB still found support in the $85-86 area as expected. If there is any follow through lower tomorrow we could see FB tag our stop at $84.90.

No new positions at this time.

Trade Description: July 4, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of March 31st, 2015 the company reported 1.44 billion monthly active users and 936 million daily active users. If FB were a country that makes them the most populous country on the planet. China has 1.35 billion while India has 1.25 billion people.

Earlier this year (March) the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

Meanwhile business at FB is great. According to IBD, FB's Q4 earnings were up +69% from a year ago. Revenues were up +49%. Q1 results were out on April 22nd. Earnings were up +20% to $0.42 per share, which beat estimates. Revenues were up +41.6% to $3.54 billion in the first quarter.
Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

FB continues to see growth among its niche properties. The company bought Instragram for $1 billion in 2012. Last late year Instragram surpassed Twitter with more than 300 million active users. FB is also a dominate player in the messenger industry with more than 600 million users on WhatsApp and 145 million users on Facebook Messenger. FB has not yet started to truly monetize its WhatsApp and Messenger properties. It's just now starting to include ads in Instagram. Eventually, with audiences this big, FB will be able to generate a lot of cash through additional advertising.

Speaking of advertising, FB has jumped into the video ad game with both feet and it's off to a strong start. FB claims that it's already up to four billion video views a day. They had 315 billion video views in Q1 2015. That's pretty significant. YouTube had 756 billion video views in Q1 but YouTube has been around for ten years (FYI: YouTube is owned by Google).
FB has only recently focused on video.

Wall Street is growing more optimistic as FB develops its blooming video ad business and its Instagram and messaging properties.
In the last few weeks the stock has seen a number of price target upgrades. Bank of America upped their FB price target from $95 to $105. Cantor Fitzergerald upped theirs to $100. Brean Capital raised theirs to $108. Piper Jaffray upgraded their FB target to $120. Currently the point & figure chart is bullish with a $113.00 target.

Technically FB was stuck in a trading range for months while still working on a long-term, slow moving up trend of higher lows. That changed a couple of weeks ago with a bullish breakout to new highs. The recent pullback is an opportunity. If traders continue to buy this dip we want to jump on board. Tonight we are listing an entry point to buy calls at $88.15.

Stop Loss: 82.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on July -- at $---.--
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: Yes, see below

Comments: 07/08/15:
There was no follow through in FISV's recent bounce. Today's market-wide plunge pushed FISV to a -1.8% drop. FISV should find support in the $82.50-83.00 area. If it does not then we may drop it as a candidate. Currently our suggested entry point to buy calls is at $85.15.

Trade Description: July 7, 2015:
Apple isn't the only one with a mobile payments platform. Last year AAPL launched its Apple Pay service, which allows people to use their smart phones (and now smart watches) to pay for stuff at the register. FISV also jumped into the mobile pay industry late last year. That's on top of a growing business of its traditional payment systems.

FISV is part of the services sector. According to the company, "Fiserv, Inc. (FISV) enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization."

Earnings have been relatively on track the last couple of quarters. FISV most recent report was announced on May 5th. They reported earnings of $0.89 per share. That was up +8.5% from a year ago and above Wall Street estimates. Revenues were up +3.4% and slightly behind expectations. The company spent $290 million buying back 3.8 million shares last quarter.

Shares of FISV had been slowly drifting higher in the $75-80 zone from February to June. Suddenly things changed. The market's big rally on June 18th helped FISV breakout from its trading range. The next day the stock was upgraded to an "outperform" and given at $95 target. This launched FISV's stock toward $85.00.

Shares have been trading technically and slowly faded back toward its mid-June breakout high. Once FISV had filled the gap it began to rally again. The stock held up well this morning during the market sell-off. When the major indices reversed higher FISV outperformed them with a +0.77% gain. We want to hop on board if FISV can rally past $85.00. Tonight we're suggesting a trigger to buy calls at $85.15. Plan on exiting this trade prior to their earnings report on July 29th.

Trigger @ $85.15

- Suggested Positions -

Buy the AUG $85 CALL (FISV150821C85)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

INSYS Therapeutics - INSY - close: 35.51 change: -1.05

Stop Loss: 33.85
Target(s): To Be Determined
Current Option Gain/Loss: -60.3%
Average Daily Volume = 607 thousand
Entry on July 01 at $36.30
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

I am not suggesting new positions at this time. Readers may want to adjust their stop loss higher.

Trade Description: June 30, 2015:
INSY is probably best known for its synthetic cannabinoid drugs that use THC, the same ingredient in marijuana. Yet it is the company's Subsys treatment, a painkiller several times stronger than morphine, that generates the most revenues for INSY. The marketing practices behind Subsys have generated some scandal-worthy headlines but nothing seems to be slowing down the stock's long-term rally.

INSY is in the healthcare sector, more specifically the biotech industry.
According to the company, "Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using our proprietary sublingual spray technology and our capability to develop pharmaceutical cannabinoids, Insys addresses the clinical shortcomings of existing commercial products. Insys currently markets two products: Subsys, which is sublingual Fentanyl spray for breakthrough cancer pain, and a generic version of Dronabinol (THC) capsules. The Company's lead product candidate is Dronabinol Oral Solution, a proprietary, orally administered liquid formulation of dronabinol that Insys believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. Insys is developing a pipeline of sublingual sprays, as well as pharmaceutical cannabidiol."

The company's earnings growth has been impressive. They have consistently beaten Wall Street's bottom line earnings estimates the last six quarters in a row. They normally beat the revenue estimate as well. Looking at the last three quarters INSY has seen its revenues jump +99.7%, +65.4%, and +70.2%. Most of that has been on strong Subsys sales, which were up +69% in the fourth quarter and up +74% in the first quarter.

INSY management is very optimistic and expects to complete four Phase III clinical trials in 2015. If successful it will significantly broaden their product line. The company just recently announced a New Drug Application (NDA) for its "proprietary Dronabinol Oral Solution for anorexia associated with weight loss in patients with AIDS; and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments. Dronabinol Oral Solution is an orally administered liquid formulation of the pharmaceutical cannabinoid dronabinol, a synthetic version of tetrahydrocannabinol (THC)."

INSY's stock has been a strong performer since the company's IPO in 2013. Shares saw a 3-for-2 split in 2014. They just completed a 2-for-1 split on June 5th.

Before I continue I want to remind traders that biotech stocks can be tough to trade. Normally stocks in this group can be volatile with lots of headline risk. The right headline about a successful test or clinical trial or FDA approval can send shares soaring. The wrong headline could see a biotech stock crash or even gap down several points.

It is important to note that not all the news is good for INSY. In late 2014
the Wall Street Journal (WSJ) ran a story about some shady marketing practices for INSY's Subsys painkiller. This is an under-the-tongue spray version of the painkiller fentanyl. Subsys has a very high risk of dependency and is currently only approved for cancer patients. Yet strangely enough only 1% of prescriptions last year were written by oncologists. Several doctors with the biggest number of Subsys prescriptions have also been under review or disciplined. The WSJ noted that the Office of the Inspector General of the U.S. Department of Health and Human Services and the U.S. Attorneys in the Central District of California and Massachusetts are all looking into the matter. This is significant because Subsys accounts for the vast majority of INSY's revenues.

Thus far the stock market has managed to ignore the shadow cast by Subsys and how the drug is prescribed and INSY's financial relationship with the doctors who prescribe it.

Last week saw biotech stocks retreat. The IBB biotech ETF had broken out in mid June and rallied to new record highs. The group reversed lower last week with a sharp correction. INSY followed its peers lower with a painful drop from $42 to $34 in about three days. Currently the $34.00 level is holding up as support. If INSY can bounce from current levels the move could be big.

A rally from here could spark a short squeeze. The most recent data listed short interest at 68% of the small 23.6 million share float. Tonight we are suggesting a trigger to buy calls at $36.30.

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: -32.6%
Average Daily Volume = 2.0 million
Entry on June 26 at $86.05
Listed on June 23, 2015
Time Frame: Exit prior to August expiration
New Positions: see below

Comments: 07/08/15:
UA weathered the market's turbulence today relatively well. Shares consolidated sideways in the $84-85 zone most of the session and only lost -0.64%.

I would hesitate to launch new positions at this time.

Trade Description: June 23, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitnessplatform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it is actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but UA grew +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance.

UA reported their 2014 Q4 results on February 4th.
The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. Many of these new price targets were in the low $90s ($91-94).

The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.
UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the following two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade.
The stock was upgraded to a "buy" with a $91 price target.

UA spent about a week digesting its bullish breakout and then took off.
The company recently announced a 2-for-1 stock split. However, instead of a normal split the company is creating a new Class C stock which will have no voting rights.

Why a new class of shares? That's because the company's founder and current CEO Kevin Plank does not want to lose control. This way he can maintain control by keeping his voting shares while still selling the new Class C shares. Just in case you were curious, Class A UA stock has one vote per share. Class B stock has ten votes per share, which Plank owns the majority of.

This stock "split" will be disbursed as a dividend. There's no word yet on the new ticker symbol for the class C shares. There is a special meeting of UA shareholders on August 26, 2015 to approve the necessary changes so they can proceed with this stock split.
Google did a similar stock split back in 2014 so the founders could maintain control. Both GOOG's and UA's decision has rankled some shareholders. However, normally stock splits tend to be viewed as a bullish move since stocks don't split if they're not rising. Stocks that split tend to outperform the broader market.

Tonight we are suggesting a trigger to buy calls at $86.05. More conservative traders may want to consider waiting for a dip instead. The nearest support is $82.00. We'll start with a stop loss at $81.75.

Stop Loss: 112.50
Target(s): To Be Determined
Current Option Gain/Loss: -10.9%
Average Daily Volume = 1.4 million
Entry on July 07 at $106.90
Listed on July 06, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments: 07/08/15:
CXO did not see any follow through on yesterday's big bounce. Shares actually erased yesterday's gain with a -2.4% drop today.

I would consider new positions at current levels.

Trade Description: July 6, 2015:
It has been a bumpy ride for energy stock traders over the last year. That's especially true for CXO investors. The stock fell from $148 to $80 in less than five months last year. CXO bottomed in December 2014. The stock managed a big bounce from $80 to $130 in the next five months but that rally is over with a big reversal on the company's Q1 earnings report in early May.

CXO is in the basic materials sector. According to the company,
"Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Company's operations are primarily focused in the Permian Basin of southeast New Mexico and west Texas."

The last couple of quarters have seen CXO's revenues decline. They reported their 2014 Q4 results on February 25th. Earnings were 88 cents a share, which was four cents above estimates. Yet revenues fell -6.0% to $594 million, way below estimates. Their 2015 Q1 results were announced on May 4th. Earnings per shares was $0.06. That was 17 cents worse than expected. CXO's revenues plunged -37.4% to $413.5 million, another big miss.
The stock reacted to this news with a spike higher that quickly reversed.

Today the oil stocks are suffering as the commodity sinks due to oversupply concerns. The weekly Baker Hughes active rig count just turned positive two weeks in a row after a 28-week decline. This would suggest the pullback in the industry is over and the market has found a temporary equilibrium that will allow domestic companies to start launching new oil and gas rigs again. This will continue to boost supply and pressure prices lower.

A bigger problem could be the Iran nuclear negotiations. If Iran does sign a deal with the West then sanctions could be lifted that would allow Iran to sell up to one million barrels of oil per day on the global market. Sources suggest Iran already has dozens of crude oil tankers filled up and ready to go if the sanctions are lifted. This is one reason crude oil has been plunging the last few days. The current deadline (and there have been many) is tomorrow, July 7th. If Iran signs a deal then oil will likely drop again. If they don't then oil could bounce. If talks are postponed again then I suspect the prevailing trend, which is down, will remain in effect for oil and the oil stocks.

CXO has technically broken down below support near $110 and its 200-dma. The point & figure chart looks very bearish and is currently forecasting an $89 target. Tonight we're suggesting a trigger to buy puts at $106.90.

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: +28.6%
Average Daily Volume = 397 thousand
Entry on June 29 at $146.90
Listed on June 27, 2015
Time Frame: exit PRIOR to August expiration
New Positions: see below

Comments: 07/08/15:
Transportation stocks were hammered lower today. The IYT underperformed the major indices with a -2.1% decline and a plunge back to new 2015 lows.

Trade Description: June 27, 2015:
The transportation stocks have been a sore spot for the wider bull market. Year to date the Dow Industrials are up +0.7% while the S&P 500 index is up +2.0%. Yet the IYT transportation ETF is down -10% in 2015 and down -12% from its all-time highs set in November 2014.

Airlines grabbed a lot of headlines in the last several weeks as their stocks fell sharply. Investors are worried that the airlines will build up too much capacity and oversupply the market forcing them to lower fares and slash their profitability.

Railroad stocks are suffering on multiple fronts. The plunge in crude oil has wiped out demand for drilling new wells. That means less demand to move equipment and less demand for proppants (like fracking sand). Plus coal demand is falling.

Delivery stocks have struggled as well. FedEx (FDX) recently reported earnings that missed expectations on both the top and bottom line. Their previous earnings report the company lowered their 2015 guidance. Back in January UPS lowered their 2015 guidance and their most recent report saw revenues below estimates. The big railroad companies have been missing earnings and lowering estimates as well.

There has been a lot of attention given to the bearish divergence between the transportation stocks and the Dow Industrials. Thus far the broader market has ignored this weakness in transports. Traditionally investors viewed the transports as a thermometer of the market's health. If transports were seeing a healthy business then the economy was healthy. If transports were struggling then the economy was or would struggle. For decades there was a pretty good correlation between the two. These days there has been some doubt over how much this relationship still exists, especially since so much business takes place online.

Tonight we're not arguing if the transports are signaling a decline for the market or the economy. Instead we're looking at the transports themselves and focusing on the IYT. The ETF is clearly underperforming. It looked like it might bottom with support near $148.00. Unfortunately for the bulls the IYT just broke down under this support level. The next support could be down near its October 2014 lows in the $137-138 area. The point & figure chart is suggesting a target of $139.00.

We want to take advantage of this breakdown. Tonight we're suggesting a trigger to buy puts at $146.90. Plan on exiting prior to the August option expiration.

Stop Loss: 34.05
Target(s): To Be Determined
Current Option Gain/Loss: +17.6%
Average Daily Volume = 7.9 million
Entry on June 16 at $33.85
Listed on June 15, 2015
Time Frame: Exit prior to earnings in late July
New Positions: see below

Comments: 07/08/15:
Airline stocks also underperformed the broader market with the XAL index down more than -2%. Shares of LUV underperformed its peers with a -3.1% decline.
This is a new 2015 closing low for LUV.

I am not suggesting new positions at this time.

Trade Description: June 15, 2015:
Last year LUV was one of the best performing stocks in the S&P 500 with a +124% gain. Shares are not seeing a repeat this year. In fact the stock is down -19% year to date. Most of the major airline stocks have been suffering as investors fear overcapacity will kill profits.

LUV is in the services sector. They're part of the regional airline industry. According to the company, "In its 44th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 46,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,400 flights a day, serving 93 destinations across the United States and five additional countries."

There are plenty of bullish investors rooting for LUV. After years of belt tightening with high oil prices the airline industry finally found some discipline and profits boomed. LUV has been a great example and many consider it the "best-in-breed" among the major airliners. LUV's earnings have surged from $0.43 a share in 2011 to $1.64 per share in 2014.

The big drop in crude oil last year was a major boon for most of the airline companies. Fuel is a huge expense and while oil has bounced off its 2015 lows it is still a lot cheaper than last year's prices.
So why are airline stocks getting crushed? The biggest worry is the industry will build into much capacity (over supply) and this will lead to price wars, which could slash profitability.

On May 20th airline stocks were crushed, shares of LUV included, after the American Airlines CEO said they would aggressively compete on price. This is after AAL had already warned that their margins would shrink in 2016 versus 2015. News that LUV was planning to boost capacity by +8% in 2015 also helped spark the plunge lower.

The sell-off in airline stocks has continued as more companies downgrade their outlook. United Airlines (UAL) recently reported that their capacity had outpaced traffic growth. Delta (DAL) warned that their Q2 revenues would decline. Even LUV warned that their May passenger revenue per available seat mile (PRASM) was down -6% from a year ago.
They adjusted their 2015 Q2 PRASM estimate to be down -4% to -5% from a year ago.

In spite of all the negativity there are a ton of analysts who are still bullish on the group. If you do any research you'll see a lot of voices shouting that the airline stocks are a buy. You'll hear how the airlines will avoid the mistakes of the past. There are plenty of analysts suggesting the airlines are a buy because their valuations are so cheap. Even the International Air Transport Association (IATA) recently raised their 2015 global estimate on airline profits from $25 billion to 29.3 billion thanks to lower oil prices and record high load factors (near 80%).

On one hand the bullish view point on airline stocks is true. Traffic is still growing. Oil prices remain depressed compared to the last few years. Valuations do look cheap. Eventually this group will get so cheap that they will find a bottom. Unfortunately that could be another -10% to -20% from current levels.

Technically LUV is a sell. The stock produced a bearish double top with its peaks in January and March. It has sliced through multiple layers of support and broken the longer-term up trend. The $34.00 level looks like short-term support. We are suggesting a trigger to launch short-term bearish positions at $33.85. Earnings are coming up in late July and we'll likely exit before LUV reports.

Stop Loss: 45.25
Target(s): To Be Determined
Current Option Gain/Loss: +6.1%
Average Daily Volume = 1.6 million
Entry on June 19 at $44.49
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments: 07/08/15:
Thankfully, after big gains yesterday, SM did not see much follow through higher on Wednesday. This morning there was a brief spike higher but it failed at the 10-dma near $45.15. Shares reversed into a -3.5% decline.

No new positions at this time.

Trade Description: June 13, 2015:
SM has been around a long time. They were founded back in 1908. The company was formerly known as St. Mary Land & Exploration Company but they changed their name to SM Energy Company about five years ago.

SM is in the basic materials sector. According to the company, "SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America."

SM operates in the Rocky Mountain region including the Bakken and Three Forks formations. Further south, they drill in the Haynesville and Woodford shales of Texas and Oklahoma. SM also operates in the Permian region of Texas and New Mexico. Even further south SM drills in the South Texas area with the Eagle Ford shale formation.

Crude oil's plunge in late 2014 crushed the oil sector and shares of SM followed it lower. Yet SM appeared to be having trouble before the big drop in oil prices. The company has missed Wall Street's earnings estimates the last four quarters in a row.

The huge drop in oil sparked significant cutbacks across the oil and gas industry with most major exploration companies reducing their capital spending plans. When SM reported their Q4 earnings in February 2015 they missed the EPS number by five cents and revenues were down -6.4% from a year ago. Management also slashed their 2015 investment plans by -44% from $1.9 billion to $1.0 billion.

SM reported its 2015 Q1 numbers on May 5th. Analysts were expecting a profit of $0.29 per share on revenues of $543.1 million. SM delivered a profit of $0.21 as revenues plunged -42% to $365.9 million.

Citigroup issued a research report last month that suggested U.S. oil producers will still be able to profit with oil at depressed prices. Here's a quote from a Bloomberg article, "belt-tightening across the industry and more strategic drilling in prolific areas would deliver ample profits even at $50 crude. The improvement is driven by costs that are expected to fall by 20 to 30 percent and techniques that allow rigs to wring 30 percent more oil or natural gas from each well compared with a year ago." That definitely seems like ammunition for the bulls to be buying some of the oil producers. Yet the group continues to lag. They are facing some stiff headwinds.

Crude oil has produced a +25% bounce off its March 2015 lows. Yet the rally in oil has stalled the last few weeks with the commodity churning sideways. The recent OPEC meeting showed that the Middle East shows no signs of slowing down their production. The world is temporarily facing a small oil glut.

Meanwhile currencies could play an issue here. It is widely accepted that the long-term trend for the U.S. dollar is now higher. The Federal Reserve will eventually raise rates, either later this year or early next year. When they start raising rates it should boost the dollar. At the same time central banks around the world (like Japan and Europe) are in the middle of huge QE programs that will drive their currencies lower. Naturally this will lift the dollar even higher. A rising dollar pushes commodities lower.

Technically shares of SM have been very weak. The broke down from a bullish channel a couple of weeks ago. The stock has also sliced through some psychological support levels. The point & figure chart is currently forecasting at $40.00 target. You could argue that SM is already oversold. However, the path of least resistance is lower. Tonight we are suggesting a trigger to buy puts at $44.90 with a wide stop loss at $50.25 just in case SM does see a little oversold bounce.